How Blockchain and ‘Microsubscription’ Services Could Help Artists Earn More From Streaming

Streaming services have boomeranged record-company revenues. But given the major labels’ influence over over track placement on services like Spotify and Apple Music — and the formulas they use to calculate artist payouts — many music makers are still struggling to make a living in the streaming ecosystem.

Now, though, a growing number of smaller streaming services have emerged offering artists — and in some cases listeners — a better deal, using alternative ways to split up the pie. Some of these companies boast a co-op model, offering acts ownership stakes, as Jay-Z’s Tidal did when it launched in 2015 with about 16 other artist-owners including Rihanna, Madonna and Coldplay (that number has subsequently increased). Others are plotting different payment schemes, such as “micro-subscriptions” to the catalogs of individual artists. And some executives at even the biggest streaming companies have mulled over how to better funnel fans’ subscription dollars directly to the artists they stream the most. Currently, artists’ royalties from streaming leaders Spotify and Apple Music are determined in part by their labels’ market share, as well as their popularity compared to all the other acts in the system.

Among the newcomers is Resonate, a streaming co-op started in 2015 based out of Berlin that has made artists and listeners co-owners of the service. Cutting against the standard subscription system, Resonate offers what founder Peter Harris calls “a ‘discovery phase’ and then a ‘fans phase’” through its #stream2own model. Listeners pay 0.002 credits the first time they hear a song, a number that doubles until the ninth play, when the listener has paid a total of 1.022 credits, a number roughly equivalent to the $1.29 iTunes store download price (though Harris said that may change based on artist input,) and can now download the song or stream it free. By doing so, Resonate is able to offer acts better compensation by avoiding the market share issues that can cause inequitable distribution and cumulative payment rates more in line with download royalties than streaming ones. Resonate claims on its site that a track with 100,000 plays on Resonate will pay out $1,526, compared to a competitor’s $600.

“I was thinking about how to do a fixed rate model, that it likely was not going to be subscription based, because that was part of the issue,” Harris said. “You get wildly different listening habits, you get some people that are listening an hour a day, others that got it on six hours a day, you know, how do you divide all that up?”

Listeners who become Resonate members (5€ annually) and artists who upload will receive a cut of any profit the company makes, though it has not yet reached that stage. The exact breakdown depends on both number of streams and amount of listener engagement, encouraging greater activity and investment among both, but the service offers 45 percent of profit to musicians and 35 percent to fans, while keeping 20 percent for operations.

Another more egalitarian service is Choon, built on blockchain technology and cryptocurrency, promising fair, timely payments, a streamlined approach to publishing rights management, and greater transparency with artists. Started by British DJ Gareth Emery, Choon is not a co-op, though Emery says he “could see us graduating to more of an artist-owned model at some point in the future.” But its decentralization emphasizes equity for artists. Choon’s goal is to provide “80 percent of proceeds for streamed music or media directly and immediately to content creators” in the form of their NOTES cryptocurrency, as well as customizable “Smart Record Contracts” built through the service that create a public record of royalty breakdowns.

“Let’s say you have a band and there’s four people, they’ve all got like a 25 percent split,” Emery said. “They all set up a Smart Record Contract, each member of the band has their own wallet, so royalties for that track just get split completely transparently 25 percent each, and just pop into the individual wallets.”

Mixcloud, a streaming service known primarily for longform content like radio programs and DJ mixes, is planning to unveil a subscription service where fans pay on a variable pricing model to receive content from individual artists, with Mixcloud receiving a to-be-determined portion of the subscription fee. The site inked a direct licensing deal with Warner Bros. last October, and is at work on securing similar deals with the other majors. Mixcloud co-founder Nico Perez expressed skepticism over the “$9.99, ‘all you can eat’ model” employed by the major streaming services.

“I think that this just kind of works better in a way, because it’s like you subscribing or supporting one entity, one single creator who you really love, and you get that kind of direct-to-fan feeling from it,” Perez said.

That intimate fan experience may ultimately be where streaming co-ops find their niche, similar to Bandcamp, the independent music retail site that paid out over $70 million to artists last year. Much like Bandcamp focuses heavily on indie labels and artists, services like Resonate and Choon want to bring independent and new acts to the fold, not pursue access to the legacy catalogue of other services.

“If we did have that full catalogue, well then we sort of end up basically being a Spotify clone,” Emery explained. “[Tidal] was seen as this model that was fairer to musicians, but essentially, because they were getting their content from the exact same places Spotify were, i.e. making these deals with the legacy majors, it was always going to be basically the same thing.”

While Tidal has used its artist-owner connections to offer high-profile exclusives like Beyoncé’s Lemonade and Jay-Z’s 4:44, it has struggled to amass subscribers as quickly as its competitors, and sold a 33 percent stake to Sprint in January 2017.

There is some skepticism over whether a true co-op could solve the issues perpetuated by major streaming services and whether the model, which has been applied to businesses from ridesharing to crowdfunding, can be applied to streaming. Kevin Duquette, co-founder of Topshelf Records, which partnered with Resonate, said that his initial distributor wouldn’t allow them to upload their catalogue to the service because they feared the service cutting into their bottom line. Topshelf eventually switched distributors, and Duquette said he sees potential major potential in the service, even if its appeal may always be somewhat niche.

“You need to listen to something what, 10 times, a dozen times or something? And at that point, if you’re listening to something that much, it’s pretty clear you like it,” he said. “And don’t get me wrong, that’s not for everyone, there’s a lot of people who don’t want to pay for music that way and they can stick to Spotify or what have you.”

“A co-op thrives in a sense through a lack of scale and on one-to-one interactions. I’m not sure if streaming affords that,” said David Turner, senior staff writer at TrackRecord and creator of the streaming newsletter Penny Fractions. “That’s why I’m not sure if the model can help with some of those other issues, because issues of transparency and payment could be fine with a major streaming service if they put resources into those parts, but they simply don’t and thus it becomes a mess.”

But while there’s a natural tendency to pitch these new streaming services as the scrappy underdog taking on Spotify and Apple, many in the field don’t see it that way. Writing for Shadowproof, Liz Pelly noted that “Music does not need the next Spotify or any type of one-size-fits-all answer.”

The co-operative model will offer artists who want more agency and transparency the opportunity to be involved in decision-making (Resonate is in the process of building out its bylaws through blockchain, and recently received a $1 million invest from blockchain system RChain), but it will also offer listeners a way to be more engaged with their music. Harris said services like Spotify encourage “passive” listening through things like mood-based playlists, while Resonate offers the chance to be more invested, both literally and artistically.

“The moment that you want to become active, our service is going to be much more fulfilling for true music fans because the level of connectivity that we’re going to provide will exceed and excel what any other service can offer, and the level of integration with the rest of what those artists are doing I think will also be higher,” he said.